February 24, 2024

One of the leading crypto Asset managers, Grayscale, has amended its Bitcoin ETF application with the US Securities and Exchange Commission (SEC). Notably, this move comes as a reaction to the regulator’s cash-creation framework.

Shockingly, the latest amendment comes the same day that Grayscale’s parent firm, Digital Currency Group (DCG), recorded a significant leadership shift as a significant member of its board of directors resigned. 

Grayscale Surrenders To The SEC’s Demand For A Cash Creation Model

A remarkable aspect of Grayscale’s amended S-3 filing lies in the company’s succumb to a cash-creation model. Eric Balchunas, a senior ETF analyst at Bloomberg, who shared the development on X, described it as a big holdout.

He noted that making the move strongly indicates that Grayscale has a trump card that would “check all the boxes.”

The cash vs. in-kind creations have been a major conflicting point between the SEC and asset managers seeking approval to issue a spot BTC ETF. Lots of stock and commodity-based exchange-traded funds (ETFs) operate as in-kind models.

These allow market investors to get direct access to the assets in the fund via other means besides cash. However, for cash-creation models, new shares in a spot BTC ETF could either be created or redeemed via cash transactions.

The US securities regulator has been working on preventing broker-dealers from direct operation with Bitcoin. This model is expected to ease the tracking of BTC transfers from exchanges and combat associated risks with anti-money laundering or KYC compliance.

Many shared skepticism over the SEC’s insistence on the in-cash model. VB Capital’s general partner, Scott Johnsson, is among those who commented. He noted that though the regular is acting toward protecting BTC ETF’s investors, the model is still novel, and whether it will work remains. 

Will Barry Silbert Departure Impact Grayscale’s ETF Potential Approval

Accompanying Garyscale’s recent ETF application amendment is a shocking piece of news. According to a recent SEC filing, Barry Silbert, CEO of Digital Currency Group, its parent company, has resigned as the chairman of the Grayscale Investments board of directors. 

The new development has sparked several reactions within the industry. Many people connected Silbert’s exit to the SEC’s potential approval of the Grayscale ETF application.

One of the prominent crypto analysts, CEO of Lumida Wealth Ram Ahluwalia, thinks Silbert’s exit was a strategic move.

Ahluwalia believes the CEO’s departure will increase Grayscale’s chances of getting its ETF’s approval. Moreover, the SEC has been probing the activities of Silbert and DCG.

Similarly, Adam Cochran, a partner at Cinneamhain Ventures, suggested that Silbert’s departure is a prearranged move. He believes the decision would present the asset manager with a favorable position before the SEC.

Besides Silbert, Mark Murphy, another board member of Graysacle, also stepped down, with both resignations effective Jan. 1, 2024.


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